Worldwide online video revenue is now expected to eclipse $4.5 billion by 2012, up from $1.2 billion in 2008, the high-tech market research firm says.

Purchased or rented videos are expected to offer the most robust growth for online video in the near term, in large part due to an increase in subscription services such as Netflix, which charges a flat monthly fee to deliver an optimal combination of packaged goods and online content that can be viewed on home TV sets.

Ad-supported professional video from major TV networks will become a strong revenue contributor by 2012.

"What is now seen as a predominantly younger pastime will spread to encompass a wider group of people, in part due to the aging of current online video viewers, but also as a result of word of mouth, spread of services, growth of in-home networks, and new network-connected consumer electronic devices," says Gerry Kaufhold, In-Stat analyst.

"The survey data in a recent In-Stat report indicates that over half of consumers actually still prefer packaged goods, which potentially bodes well for Blu-ray discs. Surprisingly, younger people who regularly watch online were the group that expressed the highest interest in owning a package goods bundle that includes artwork and extra content."

The In-Stat research covers the worldwide market for online video, including video rental/purchase, ad-supported TV programs, and ad-supported User Generated Video. The report presents an in-depth discussion of the market dynamics, as well as analysis of the various online video business models, and concludes that flat-rate pricing for a combination of packaged goods and online convenience is becoming the winning approach.

It provides forecasts for broadband penetration, growth in online video viewers, and online video revenue for three categories through 2012. It also includes analysis of a recent In-Stat U.S. consumer survey on online video.

In-Stat's market study found the following:

- By 2012, 39 percent of adults in the U.S. are expected to have purchased or rented online video.

- 54 percent of respondents to an In-Stat survey of U.S. consumers still favor physical discs when purchasing movies or TV shows.

- By 2012, In-Stat forecasts that 90 percent of U.S. households will have access to broadband, with 94 percent of these individuals watching online video.